Filed 9/29/20

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SIX

BUTLER AMERICA, LLC,

 Plaintiff and Respondent,

v.

AVIATION ASSURANCE 

COMPANY, LLC, et al.,

 Defendants and Appellants.

2d Civ. No. B298696

(Super. Ct. No. 1440003)

(Santa Barbara County)

Alter egos of a judgment debtor appeal an order amending 

the judgment to add them as judgment debtors. We affirm. A 

judgment debtor with an empty shell is easy to crack.

FACTS

Craig Garrick controls and has an ownership interest in a 

number of entities involved in the aviation business. Among the 

entities are: Aviation Assurance Company, LLC (AAC); ComAv, 

LLC (ComAv); ComAv Asset Management, LLC, formerly known 

as Pacific Aviation Group, LLC (PAG); ComAv Technical 

Services, LLC, formerly known as Southern California Aviation, 

LLC (SCA); and Aviation Finance Services, LLC (AFS) 

(collectively “Garrick entities”).
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The trial court ordered that Garrick individually and the 

Garrick entities be added to a judgment Butler America, LLC 

(Butler) has against AFS.

Butler v. AFS

Butler and AFS signed a written contract in which Butler 

would provide staffing and payroll services to AFS. Butler paid 

AFS’s staff and billed AFS for its services. AFS made partial 

payment on Butler’s invoices, but ultimately defaulted on the 

agreement, leaving $896,578.40 owing to Butler.

Butler sued AFS to recover the balance owing. In June 

2014, the parties entered into a settlement agreement. The 

parties contemplated that AFS would receive income by 

managing the leasing of jet engines owned by Scaled Composites, 

LLC (Scaled Composites contract). Under the terms of the 

settlement agreement, AFS would pay Butler the greater of 

$10,000 per month or 50 percent of the monthly revenue AFS 

received for its management responsibilities to Scaled 

Composites, LLC. 

The settlement agreement provided that AFS would grant 

Butler “a security interest in AFS’s entire revenue and income 

interest in the [Scaled Composites contract].” AFS executed a 

security agreement as part of the settlement. The security 

agreement refers to AFS’s “revenue and income interest” in the 

Scaled Composites contract as security for AFS’s performance of 

the settlement agreement. The Scaled Composites contract was 

attached as an exhibit to the security agreement. The Scaled 

Composites contract, however, was between Scaled Composites 

and PAG, not AFS. 

Paragraph 3.1 of the settlement agreement provides for 

mutual releases as follows: “3.1 Subject to Section 3.2 below, 
3

BUTLER and AFS hereby fully and forever release and discharge 

each other and their parents, subsidiaries and all their respective 

heirs, attorneys, agents, representatives, affiliates, predecessors, 

successors, directors, members, managers, officers, and/or 

employees from any and all claims, suits, causes of action, 

obligations, damages, liability, costs, fees and expenses, of 

whatever kind or nature, in law, equity or otherwise, known or 

unknown, contingent or non-contingent, which in any manner 

arise from, relate to, or could have been asserted in the Action, 

and any other claim that exists between BUTLER and AFS, 

whether related to the Action or completely unrelated to the 

Action.” 

Section 3.2 of the settlement agreement provides that the 

releases in section 3.1 shall not apply to “any claim, cause of 

action or liability arising from a Party’s breach of this Agreement 

or the Security Agreement . . . .” 

Finally, the settlement agreement provides for a stipulated 

judgment to be entered on breach of the agreement. 

AFS made 10 minimum $10,000 monthly payments to 

Butler under the settlement agreement, then defaulted. The trial 

court entered the stipulated judgment against AFS. The 

judgment now totals $1.2 million. Butler has been unable to 

collect any of it. 

Motion to Add Alter Ego Defendants

AFS was a shell entity. From 2012 it had no substantial 

assets and conducted no substantial business activities. From 

February 2012 to February 2014, AAC deposited money in AFS’s 

bank account that AFS passed through to Butler as partial 

payment on Butler’s invoices. AAC also deposited money that 

AFS passed through to its attorneys to defend AFS in the Butler 
4

lawsuit and to pay Butler under the settlement. Garrick claimed 

the money AFS received from AAC was a loan. But Garrick 

admitted there are no loan documents and he could not identify 

the terms of the loan.

AFS did not have any employees who were not also 

employees of other Garrick entities. Thus, the money Butler was 

paying for AFS staffing was paying for the staffing of other 

Garrick entities. Garrick could not identify any transaction that 

a Butler-paid AFS employee performed for AFS. 

All the Garrick entities had the same office in Victorville. 

When asked about communications between AAC and AFS, 

Garrick replied that it was silly to ask how he communicated 

with himself. Garrick acknowledged there was no written 

agreement between PAG and AFS as to what AFS’s role would be 

in the Scaled Composite contract or what income AFS would 

receive from the contract. 

In making the settlement agreement, AFS disclosed that it 

had no assets and provided documentation to support that 

disclosure. AFS, however, failed to disclose that it was not a 

party to the Scaled Composites contract; that there was no 

written agreement as to what income AFS would receive under 

the contract; and that from July 2013, when the Scaled 

Composites contract was made, through June 2014, when AFS 

induced Butler to enter into the settlement agreement, PAG had 

received no income from the contract. The trial court found that 

the security agreement was illusory. 
5

DISCUSSION

I.

Release Clause

The release clause in the settlement agreement releases all

subsidiaries, parents, and principals of AFS. Garrick contends he 

and the Garrick entities are protected by the settlement 

agreement’s release clause. Garrick is wrong for a number of 

reasons, any one of which is fatal to his argument. 

(a) Express Terms of the Release Clause

The settlement agreement’s release clause, section 3.1, 

begins, “Subject to Section 3.2 below . . . .” Section 3.2 provides in 

part, “The above releases in Section 3.1 shall not apply to . . . any 

claim, cause of action or liability arising from a Party’s breach of 

this Agreement . . . .” The stipulated judgment arose directly 

from AFS’s breach of the settlement agreement. By the terms of 

the settlement agreement, the releases do not apply. 

Garrick relegates section 3.2 in his opening brief to a 

footnote. He does not cite the text of the section. Instead, he 

cryptically states that the exceptions set forth in section 3.2 

concern the parties’ obligations under the settlement agreement, 

and that only Butler and AFS are parties to the agreement. 

From this, he expects us to conclude that the exceptions stated in 

section 3.2 apply only to AFS and Butler. But that is not what 

section 3.2 says. It says, “The above releases in Section 3.1 shall 

not apply . . . .” Nothing in section 3.2 can reasonably be 

construed as limited to releases between Butler and AFS. 

Garrick’s reliance on In re Mission Ins. Co. (1995) 41 

Cal.App.4th 828 is misplaced. There the court stated, ‘“Because 

appellants knew they had a claim . . . against respondents, they 

had a duty to specifically exclude that claim from the release 
6

agreement.”’ (Id. at p. 839, quoting Edwards v. Comstock Ins. Co. 

(1988) 205 Cal.App.3d 1164, 1169.) That is exactly what section 

3.2 does. It excludes from the release any action to enforce the 

settlement agreement.

(b) Breach of Contract

It is undisputed that AFS breached the settlement 

agreement. It is a fundamental principle of contract law that a 

material breach by one party excuses performance by the 

non-breaching party. (Civ. Code, § 1439; Walker v. Harbor 

Business Blocks Co. (1919) 181 Cal. 773, 778 [promisor’s failure 

to perform releases promisee from performance and justifies 

promisee in abandoning the contract].) Here, AFS’s breach of the 

settlement agreement terminated the agreement, including the 

releases. AFS cannot breach the settlement agreement and also 

demand its benefits. 

Garrick argues that he and the Garrick entities are not 

parties to the settlement agreement. But if Garrick and the 

Garrick entities have any standing under the agreement, they 

are third party beneficiaries. A third party beneficiary’s rights 

are no greater than those of the promisee. (Gietzen v. Covenant 

RE Management, Inc. (2019) 40 Cal.App.5th 331, 339-340 

(Gietzen).) When AFS’s breach terminated its rights in the 

settlement agreement, Garrick and the Garrick entities’ rights 

were also terminated.

(c) Merger in the Judgment

When a final judgment is entered, all causes of action 

arising from the same obligation are merged into the judgment. 

(Diamond Heights Village Assn., Inc. v. Financial Freedom Senior 

Funding Corp. (2011) 196 Cal.App.4th 290, 301.) The judgment 
7

extinguishes the contractual rights of the parties and substitutes 

only such rights as attach to the judgment. (Id. at pp. 301-302.)

Here when the stipulated judgment was entered on the 

settlement agreement, it terminated all of AFS’s and its third 

party beneficiaries’ rights in the agreement, including the 

releases.

Garrick cites Gietzen, supra, 40 Cal.App.5th 331, for the 

proposition that the entire contract is not merged into the 

judgment. He concludes that under Gietzen only AFS’s rights are 

merged into the judgment because the question of additional 

debtors was not before the court when the judgment was entered. 

Garrick’s reliance on Gietzen is misplaced. 

In Gietzen, a shopping center tenant sued its landlord for 

breach of a lease covenant to provide adequate parking. The 

tenant recovered a money judgment on that cause of action. But 

the judgment did not terminate the lease, and the tenant 

remained in possession. In attempting to collect on its money 

judgment, the tenant was hampered by a lease provision limiting 

the landlord’s liability to its interest in the shopping center. The 

tenant argued that the provision was not enforceable because the 

lease had been terminated by merger in the judgment. That was 

not true. The tenant was still in possession, and the parties had 

continuing obligations to each other under the lease. We held 

only the cause of action that resulted in the judgment was 

merged into the judgment. (Gietzen, supra, 40 Cal.App.5th at 

p. 337.)

Here, in contrast to Gietzen, when AFS breached the 

settlement agreement, Butler had no further obligation to AFS. 

The settlement agreement was terminated and merged into the 

judgment. Gietzen does not stand for the proposition that third 
8

party beneficiaries are not merged in a judgment against the 

promisee. In fact, Gietzen makes it clear that the rights of third 

party beneficiaries cannot be greater than those of the promisee. 

(Gietzen, supra, 40 Cal.App.5th at pp. 339-340.)

(d) Fraud

The trial court found that in entering into the settlement 

agreement, AFS failed to disclose that AFS was not a party to the 

Scaled Composites contract; that AFS had no written agreement 

with PAG as to what role AFS would have in the contract or what 

income AFS would receive under the contract; and that from the 

time PAG executed the contract in July 2013 through June 2014 

when AFS induced Butler to enter into the settlement agreement,

PAG had received no income from the contract. The court 

concluded that “AFS’s pledge of the Scaled Composites monies 

was essentially illusory.” 

Garrick argues the trial court’s findings are not supported 

by substantial evidence. His argument is based on a view of the 

evidence most favorable to himself. But that is not how we view 

the evidence. On appeal, all conflicts in the evidence are resolved 

in favor of the respondent and all reasonable inferences are 

indulged in to uphold the findings of the trial court. (Associated 

Vendors, Inc. v. Oakland Meat Co. (1962) 210 Cal.App.2d 825, 

835.) 

The elements of a cause of action for fraudulent 

concealment are: (1) concealment of a material fact; (2) by a 

defendant with a duty to disclose; (3) the defendant intended to 

defraud by failing to disclose; (4) plaintiff was unaware of the fact 

and would not have acted as it did had it known the fact; and (5) 

damages. (Hambrick v. Healthcare Partners Medical Group, Inc. 

(2015) 238 Cal.App.4th 124, 162.) A release obtained through 
9

fraud is invalid. (M.G. Chamberlain & Co. v. Simpson (1959) 173 

Cal.App.2d 263, 276.) 

Garrick argues that Butler knew AFS was not a party to 

the Scaled Composites contract. He points out that the contract 

was attached as an exhibit to the security agreement. But one 

need not be a direct party to a contract to have an interest in it. 

Both the settlement agreement and the security agreement 

represented that AFS had a “revenue and income interest” in the 

contract, and that AFS would pay Butler from its “management 

responsibilities” under the contract. But the facts were that AFS 

had no income interest in the contract, or for that matter, no 

interest of any kind, and AFS had no management 

responsibilities in the contract from which to derive income. In 

addition, at the time the settlement agreement was signed, the 

Scaled Composites contract was moribund if not dead. There was 

no chance AFS would ever receive income from the Scaled 

Composites contract. AFS knew the facts, but failed to disclose 

them. The entire transaction reeks of fraud on AFS’s part. 

AFS argues the trial court abused its discretion in 

considering Butler’s fraud allegation because Butler raised the 

matter for the first time in its reply papers. But the record shows 

that Butler raised the matter in its initial moving papers. 

Moreover, Garrick’s counsel commented on Butler’s claim of 

fraud at the hearing on the motion, but raised no objection or 

requested the opportunity to respond. Garrick has forfeited the 

issue on appeal. (See Wiley v. Southern Pacific Transportation

Co. (1990) 220 Cal.App.3d 177, 188 [failure to object to a 

procedural defect forfeited defect on appeal].)

Garrick claims that Butler cannot rescind the agreement 

for fraud and retain the $100,000 paid to it by AFS. But Butler is 
10

not rescinding the settlement agreement; it is enforcing it. 

Butler can avoid a release induced by fraud without rescinding 

the agreement. (Gajanich v. Gregory (1931) 116 Cal.App. 622, 

631 [a release may be attacked for fraud that induced the release 

and no decree of rescission is necessary].)

Garrick’s reliance on Village Northridge Homeowners Assn. 

v. State Farm Fire & Casualty Co. (2010) 50 Cal.4th 913, is 

misplaced. There the court concluded that “a release of a 

disputed claim . . . does not permit a party to elect the remedy of 

a suit for damages [for fraud] when the release itself bars that 

option.” (Id. at pp. 917-918.) But here the release does not bar 

that option. Section 3.2 expressly provides that the release does 

not cover actions to enforce the settlement agreement. 

II.

Evidence of Alter Egos

Garrick contends the trial court erred in finding that 

Garrick and the Garrick entities are the alter egos of AFS. 

Code of Civil Procedure section 187 (section 187) provides: 

“When jurisdiction is, by the Constitution or this Code, or by any 

other statute, conferred on a Court or judicial officer, all the 

means necessary to carry it into effect are also given; and in the 

exercise of this jurisdiction, if the course of proceeding be not 

specifically pointed out by this Code or the statute, any suitable 

process or mode of proceeding may be adopted which may appear 

most conformable to the spirit of this code.”

The authority provided to courts by section 187 includes 

the power to add a judgment debtor where a person or entity is 

an alter ego of the original judgment debtor. (Dow Jones Co. v. 

Avenel (1984) 151 Cal.App.3d 144, 148.) In doing so, the court is 

amending the judgment to add the real judgment debtor. (Id. at 
11

p. 149.) Ordinarily a corporation, or in this case a limited 

liability entity, is regarded as a separate legal entity. (TohoTowa Co., Ltd. v. Morgan Creek Productions, Inc. (2013) 217 

Cal.App.4th 1096, 1106.) But where such an entity is used to 

perpetrate fraud or to accomplish some other wrongful or 

inequitable purpose, a court may disregard the entity and treat 

its acts as if done by the persons actually controlling it. (Ibid.) 

In applying the alter ego doctrine, no particular findings are 

necessary, but the conditions under which a corporate entity 

should be ignored vary according to the circumstances of each 

case. (Id. at p. 1108.) 

Factors for the court to consider include identical equitable 

ownership, comingling of funds, use of the same offices, disregard 

of formalities, and use of one entity as a mere shell for the affairs 

of another. (Toho-Towa Co., Ltd. v. Morgan Creek Productions, 

Inc., supra, 217 Cal.App.4th at pp. 1108-1109.) An important 

factor in determining alter ego liability is that a corporate entity 

is so undercapitalized that it is likely to have no sufficient assets 

to meet its debts. (Automotriz del Golfo de California S. A. de C.

V. v. Resnick (1957) 47 Cal.2d 792, 796-797.) 

In addition to showing a unity of ownership, the moving 

party must show an inequitable result will follow if the acts are 

treated as those of the entity alone. (Relentless Air Racing, LLC 

v. Airborne Turbine Ltd. Partnership (2013) 222 Cal.App.4th 811, 

815.) The decision to grant an amendment to add additional 

judgment debtors is reviewed for an abuse of discretion. (Ibid.)

In arguing that the trial court’s findings are not supported 

by substantial evidence, Garrick again presents a view of the 

evidence most favorable to himself. But we view the evidence in 

a light most favorable to the judgment or order. (Associated 
12

Vendors, Inc. v. Oakland Meat Co., supra, 210 Cal.App.2d at 

p. 835.)

Here, Garrick owned and controlled all the Garrick entities. 

They had the same office and shared employees. Garrick used 

the money Butler paid to staff AFS to pay the employees of the 

other Garrick entities. The money AFS paid to Butler, as well as 

the money AFS paid for its defense of Butler’s lawsuit, came from 

another Garrick entity. Garrick characterized the payments as 

loans, but the trial court did not find his testimony credible. He 

could not produce loan documents. Garrick did not observe the 

formalities required for keeping the entities separate. He 

dismissed the need for formal notice of a transaction between 

entities as giving notice to himself. 

Most importantly, AFS was nothing but a shell. It had no 

substantial business activity and no income with which to pay its 

debts. The trial court could reasonably conclude its only function 

was to act as a screen for Garrick and the Garrick entities to hide 

behind to avoid paying Butler. The court’s decision to amend the 

judgment is supported by overwhelming evidence. 

Garrick argues the trial court improperly considered 

pre-release conduct. He relies on the authority that the release 

bars claims based on events occurring prior to the date of the 

release. (Citing Villacres v. ABM Industries, Inc. (2010) 189 

Cal.App.4th 562, 589.) But Garrick’s authority concerns claims 

that give rise to a cause of action. Amending the judgment is not 

a cause of action. It simply adds the true judgment debtors. In 

any event, pursuant to section 3.2 of the settlement agreement, 

the release does not apply. In addition, the release was procured 

by fraud. 
13

Garrick argues there is no evidence that an equitable result 

will follow if the acts of AFS are treated as those of AFS alone. 

But it would be an inequitable result to preclude Butler from 

collecting its judgment by treating AFS as a separate entity. 

(Relentless Air Racing, LLC v. Airborne Turbine Ltd. Partnership, 

supra, 222 Cal.App.4th at p. 816.)

III.

Estoppel

Garrick contends Butler is equitably estopped from denying 

the separate existence of AFS and the Garrick entities. 

The elements of equitable estoppel are: (1) the party to be 

estopped must be apprised of the facts; (2) he must intend that 

his conduct shall be acted upon, or must so act that the party 

asserting estoppel had the right to believe that it was so 

intended; (3) the party asserting the estoppel must be ignorant of 

the true state of facts; and (4) he must rely on the conduct to his 

prejudice. (Hopkins v. Kedzierski (2014) 225 Cal.App.4th 736, 

756.)

Garrick does not rely on the traditional elements of 

estoppel in his opening brief. Instead he cites Communist Party 

v. 522 Valencia, Inc. (1995) 35 Cal.App.4th 980 (Communist 

Party). In that case, the Communist Party claimed it is the alter 

ego of two corporations and requested the trial court to impose a 

constructive trust in the Communist Party’s favor on the 

corporations’ assets. In reversing the trial court’s order imposing 

a constructive trust, the Court of Appeal said, “[A]lter ego is used

to prevent a corporation from using its statutory separate 

corporate form as a shield from liability only where to recognize 

its corporate status would defeat the rights and equities of third 

parties; it is not a doctrine that allows the persons who actually 
14

control the corporation to disregard the corporate form.” (Id. at. 

p. 994.) 

Far from assisting Garrick, Communist Party affirms that 

third parties such as Butler are not estopped from attacking the 

corporate status to prevent the defeat of their rights and equities. 

It is the persons who control the corporation who are estopped to 

deny the corporate status.

Garrick’s reluctance to rely on the elements of estoppel is 

understandable in light of his inability to qualify under those 

elements. Garrick argues, contrary to the trial court’s findings, 

that Butler was aware of all the pertinent facts prior to entering 

into the settlement agreement. Assuming for the sake of 

argument that is so, Garrick cannot satisfy two other elements.

The party asserting estoppel must be ignorant of the true 

state of facts and must show prejudice. Garrick was not ignorant 

of the true state of facts. He was well aware of all the facts. Nor 

can he show prejudice from Butler’s reliance on the corporate 

form. To the contrary, Garrick used the corporate form to his 

advantage and to the prejudice of Butler. 

Garrick cites Highland Springs Conference & Training 

Center v. City of Banning (2016) 244 Cal.App.4th 267, 285, for the 

proposition that prejudice is not required where the plaintiff 

acquiesced in the actions complained of. He claims Butler 

acquiesced in treating AFS as a separate entity when it elected to 

limit its security agreement to AFS’s interest in the Scaled 

Composites contract. But nowhere in the settlement agreement, 

the security agreement, or stipulated judgment does it state that 

Butler’s remedies are limited to AFS’s interest in the Scaled 

Composites contract. In fact, AFS had no interest in the Scaled 
15

Composites contract. The security interest was illusory and a

vehicle Garrick used to perpetrate a fraud on Butler. 

Equitable estoppel is a creature of equity. The foundation 

of equity is good conscience. (DeGarmo v. Goldman (1942) 19 

Cal.2d 755, 764.) Equity will not aid one who acts 

unconscionably. (Ibid.) 

Here Garrick breached the agreement to pay Butler; 

fraudulently induced Butler into entering into a settlement 

agreement; breached the settlement agreement; and is hiding 

behind a shell entity to avoid a lawful debt. Garrick now seeks 

the aid of equity to prevent Butler from collecting on its 

judgment. Garrick’s conduct is unconscionable. Equity will not 

aid him. 

IV.

Precedent

Garrick contends affirmance of the trial court’s ruling 

would set a dangerous precedent.

Garrick argues that other investors and creditors of the 

Garrick entities have relied on the separate existence of those 

entities. He also claims the creditors relied on the settlement 

agreement and release in making business decisions. The 

creditors have had no opportunity to be heard.

But the same can be said anytime alter ego liability is 

imposed. Liability that might appear to be confined to one entity 

is imposed on other persons or entities. It is a risk unsecured 

creditors take. The existence of the settlement agreement and 

release changes nothing. Creditors know or should know that the 

settlement agreement, like any other contract, can be breached, 

possibly resulting in alter ego liability. 
16

To accept Garrick’s argument would result in the end of 

alter ego liability. That would harm creditors even more than its 

imposition. It would further encourage dishonest business 

owners to establish shell entities to avoid liability for lawful debt. 

The cases on which Garrick relies involve the treatment of 

creditors in bankruptcy. (Chemical Bank New York Trust Co. v. 

Kheel (2d Cir. 1966) 369 F.2d 845, 848; Leslie v. Mihranian (In re 

Mihranian) (9th Cir. 2019) 937 F.3d 1214, 1215-1218.) Garrick is 

not in bankruptcy. The cases are not relevant here.

Garrick’s expression of concern for his creditors is belied in 

light of his conduct toward Butler. The authority of the trial 

court to add alter egos as judgment debtors has long been 

recognized. (Toho-Towa Co., Ltd. v. Morgan Creek Productions, 

Inc., supra, 217 Cal.App.4th at p. 1106.) Not affirming it here 

would set a dangerous precedent. 

DISPOSITION

The judgment (order) is affirmed. Costs on appeal are 

awarded to respondent.

CERTIFIED FOR PUBLICATION.

GILBERT, P. J.

We concur:

YEGAN, J.

PERREN, J.
Donna D. Geck, Judge

Superior Court County of Santa Barbara

______________________________

Buchalter, Robert M. Dato and Joseph M. Welch for 

Defendants and Appellants. 

Chora Young, Paul P. Young, Joseph Chora and 

Armen Manasserian for Plaintiff and Respondent.